Mega-Mergers in the Pharmaceutical Industry: In Whose Interests?
Alain Li Wan Po
Companies merge to achieve economies of scale. In an industry such as the pharmaceutical industry which relies on a high level of investment in research and development, such mergers appear rational. However, it is not at all obvious that a higher level of investment by a smaller number of firms will necessarily lead to an increased rate of genuine innovations. There is a risk that conflicts of interest and the pursuit of short term gains may encourage more mergers than is optimal for the industry. The impact of mega-mergers in the pharmaceutical industry on research output, employees, shareholders, financial advisers, managers and patients is discussed. A healthy pharmaceutical industry, able to invest the necessary resources in the development of innovative medicines is in the interest of patients and shareholders alike. Over-concentration may interfere with innovative activity and lead to monopolistic power. Close scrutiny of merger activity is important but in a deregulated world, governments may have little power to act. In any case, a drug-specific monopolistic industry may be beneficial to some countries which may therefore be reluctant to act in the interest of the world as a single community in search of more effective medicines.
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